In the breakup of a transit collaborative, good news for transit

Transit board’s end could erase question marks for light-rail funding

A regional collaboration on transit planning and funding may be ending, but that turns out to be good news for the state’s largest-ever transit project.

After backing off from a breakup earlier this year, members of the Counties Transit Improvement Board now have a plan to dissolve a partnership that lasted nearly a decade. It frees the counties to raise money for transit projects on their own, and potentially to erase the remaining questions marks in the local funding package for the nearly $1.9 billion Southwest Light Rail Transit project.

The funds CTIB spent on local transit projects came from a quarter-cent sales tax and a $20 motor vehicle sales tax levied in its five member counties: Hennepin, Ramsey, Dakota, Anoka and Washington. Under current state law, once they end the partnership, those counties could choose to raise the sales tax to a half-cent.

Hennepin County will likely do just that to make up for the state’s missing 10-percent contribution to the light-rail project, Hennepin County Board Chair Peter McLaughlin said. A 14.5-mile extension of the METRO Green Line that currently runs between Minneapolis and St. Paul, the project would extend the tracks through the southwestern suburbs to Eden Prairie.

“We’ve always had a way to finance Southwest; this is just a better way to finance Southwest,” said McLaughlin, who also chairs CTIB.

Metropolitan Council Chair Adam Duininck described the pending deal as “another piece of good news” following word that Southwest Light Rail Transit would receive $10 million in the next federal budget. Project supporters consider that a down payment on the nearly $930 million expected from the Federal Transit Administration, enough to cover half of construction costs.

“Those two pieces of news together, again, it just removes any of this uncertainty the critics are trying to promote,” Duininck said.

Those critics would disagree. The FTA has yet to approve a full-funding grant agreement for the project, which also remains the subject of an ongoing lawsuit by the Lakes and Parks Alliance. The local citizens group alleges planners improperly settled on a route through Minneapolis’ Kenilworth Corridor before completing a full environmental review.

Striking a deal

Reaching an agreement on CTIB’s five-way divorce required sweetening the pot for Dakota County. When CTIB funds are distributed among the five member counties, Dakota’s share of those funds will be $21.3 million, a more than 40 percent increase in the $14.8 million offer discussed by board members in March.

As part of the deal, the Met Council also agreed to take over from CTIB the ongoing operating subsidy for the METRO Red Line, which amounts to over $1 million a year. The bus rapid transit route connects the Mall of America to the Apple Valley Transit Station in Dakota County.

The plan still requires approval by the boards of all CTIB member counties. The goal is to notify the Department of Revenue in June so that taxes currently collected by CTIB can be rerouted to the counties by October, McLaughlin said.

He said a more detailed timeline for the breakup would be developed after the current legislative session adjourns in St. Paul, where bills under consideration could have a significant impact on the resources available for transit projects.

Funding burden shifts

The breakup of CTIB also means some of the burden for funding Southwest Light Rail Transit construction will shift to Hennepin County from the Met Council.

Met Council reluctantly agreed last year to issue $103.5 million in so-called certificates of participation to complete the project’s local funding package, turning to the new and still largely unknown financial instrument as part of a $144.5-million deal brokered by Gov. Mark Dayton. Hennepin County also increased its contribution of the project as part of a plan to get around Republic opposition to light-rail projects at the Capitol and make up for the state’s incomplete financial contribution to the project.

Duininck said he was “relieved” Met Council would not have to issue the certificates of participation as planned this summer, calling it “the best of bad options.” Instead, McLaughlin said, Hennepin County plans to borrow the $103.5 million and pay for it with the additional tax revenue it collects after CTIB ends.

The county will also pay a lower interest rate than Met Council would have on certificates of participation. That shrinks, but only slightly, the budget deficit that has Met Council considering bus and light rail fare hikes for its Metro Transit service.

Spokesperson Kate Brickman that deficit was estimated at $67.5 million for the coming biennium, down from an estimate of $74 million earlier this year. Not issuing certificates of participation will save the agency about $9 million over those two years, but Met Council will also pay an additional $2.5 million for METRO Red Line operations during that same period, Brickman said.

The future of regionalism

The pending end of CTIB could be interpreted as a blow to regionalism, and Duinicnk, whose Met Council is itself a form of regional governance, said it was something that concerned him early on in the conversation about ending the transit partnership. But he said the relationships between the counties “are as strong as they’ve ever been.”

“It aligns the region probably more with what the transit needs are,” Duininck added, noting that, while all CTIB member counties have transit operations, there are far more riders and much higher frequency service in Hennepin and Ramsey counties.

“I think it’s about the outcomes,” he said. “It’s about having a strong bus and light-rail system.”

McLaughlin shared a similar sentiment. While “on its face, it looks like step backwards for regionalism,” he said, the end of CTIB means more money for a transit system that is used in all of the member counties.

“It’s a plus for the region, because the regional transit system is going to have more money invested in it in the long run,” he said.